Working capital management under supply chain disruption: The role of government response during economic uncertainty

Supply chain finance (SCF) stems from supply chain management (SCM), where firms deploy various approaches (e.g., inventory management and working capital management) to maximize firm performance. Firms utilize working capital management (WCM) to optimize their operating cash to create firm value. This study focuses on how firms could deploy the WCM approach through receivables, inventories, and payables to maximize long-term and short-term firm performance. It is worth noting that the components in WCM serve different roles in firm performance where shareholders value shorter receivable periods to avoid customer default risk, but firms could benefit from long receivable periods for short-term operation performance. In addition, governments from various countries implemented different policies to reduce adverse economic impacts of the pandemic. The sample includes publicly listed manufacturing companies in the United States, the United Kingdom, Singapore, and Australia where different levels of government response have been observed. By using Ordinal Least Squares (OLS) regression analysis and adopting government policy as moderator, the results show that the government actions during the pandemic serve as the mitigating effect in the manufacturing supply chain. The analyses also show that the government policies implemented have successfully supported supply chain resilience during pandemic, especially to loss-making firms from decreased firm value.